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RBA rate announcement hold

The Reserve Bank of Australia has announced the result of its monthly board meeting.

The official cash rate has been left at a record-low 2.5 per cent for the 17th consecutive meeting, as most economists had predicted.

A finder.com.au survey of 30 economists and commentators found that 28 expected the cash rate to remain at 2.5 per cent, where it has been since August 2013.

Just two predicted a rate cut.

A cut would not have been a shock given the weight of speculation that has occurred since the last board meeting on December 2.

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Westpac, NAB and ANZ all subsequently forecast that rates would fall some time in the first half of 2015.

This was the first time since August 2013 that any of the respondents in the monthly finder.com.au survey had tipped action from the board.

Bill Evans, chief economist at Westpac, and Nathan McMullen, head of product and digital at RAMS, were the two experts who predicted a rate cut, both by 0.25 per cent.

However, it appears that conflicting forces in the economy have cancelled each other out, with soft economic growth and inflation being offset by a strong housing market.

Opinion is divided on where rates are headed: 14 of the survey respondents said the next move will be down and 16 think it will be up.

ANZ chief economist Warren Hogan said although the balance has “sharply shifted” towards a rate cut over the past two months, the board would want to see more data before acting.

HSBC chief economist Paul Bloxham said rates are already very low and there are clear signs that monetary policy is working.

However, Raine & Horne chief executive Angus Raine said the Reserve Bank would cut rates soon, probably in March or April.

“The RBA will take a little bit more time to absorb the impact of slowing Chinese growth, lower oil prices and the outcome of the European Central Bank's stimulus measures,” Mr Raine said.

The prolonged period of interest rate stability has been good news for the property market, according to LJ Hooker chief executive Grant Harrod.

Mr Harrod said it had created confidence, increased demand, and driven building approvals and construction.

RBA rate announcement hold
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